HFA Roundtable: States Sound Off

Susan Dewey
Executive director, Virginia Housing Development Authority

Virginia’s 2015 QAP introduces substantial point incentives for developers to combine 9% and 4% credits on the same site. This incentive encourages developers to use 4% credits where they can make them work within their deals as opposed to seeking 9% credits for the entire development. By using fewer competitive credits, the hope is that more deals will have access to this valuable limited resource.

The points are on a sliding scale in which a minimum of 30% of aggregate units must be financed through tax-exempt bonds for 20 points. The maximum attainable points are 40, which are available if 50% of the aggregate units are tax-exempt. In the current application round, we have had six applicants apply for this point category.

What trends are you seeing in your 9% and/or 4% credit low-income housing tax credit (LIHTC) programs?

The Department of Housing and Urban Development’s efforts to preserve and renovate its aging public housing stock through the Rental Assistance Demonstration (RAD) program by using tax credits has increased demand for credits across the country. Use of the 4% credit with these properties, as had been initially envisioned, has not come to pass. In Virginia, nearly every development in the RAD program is applying for a 9% competitive award.

Although preserving public housing developments is a worthy objective, each state must address a wide array of needs, including preservation, adding new units, and providing targeted unit types to serve populations such as homeless veterans and persons with disabilities. VHDA endeavors to maintain a balance among all our housing partners and the different types of housing needs.

What strategies are you implementing to preserve existing affordable housing?

VHDA continues to incentivize preservation by providing points for Sec. 8 and RD Sec. 515 deals. Specifically, we still incentivize developments that are listed on Virginia’s RD Sec. 515 Portfolio Rehabilitation Priority List and get applications annually for developments on that list. Also, RAD deals get credit for new federal subsidies in the competitive pools.

Perhaps more interesting is our attempt to move beyond simply preserving units, as VHDA remains committed to modernizing preserved units and making them as energy efficient as possible. As a result, one new strategy for 2015 that addresses energy efficiency in rehab deals includes increased developer fees for tax-exempt developments that pursue LEED/EarthCraft certification.

What is your agency doing to address cost containment?

Perhaps because of its diverse urban/rural geography, VHDA was one of the first housing finance agencies to realize the need to implement cost limits in different geographic regions of the state. To that end, we began the cost containment effort with a third-party study of costs throughout Virginia, resulting in the current QAP’s strict cost limits and the ability to apply significant penalty points on future applications for tax credits if the limit is exceeded at cost certification. The limits are adjusted by geography, type of construction (new/rehab), and include increases for factors on sites such as structured parking. The limits are adjusted annually to take into account increases in construction costs.

What advice do you have for developers applying for LIHTCs and/or other financing in your state? What’s a common mistake developers make when applying for funding?

Anyone applying for tax credits in Virginia is strongly urged to attend VHDA’s annual “How to Apply” workshops. The LIHTC program staff is a highly engaged, customer-focused group that seeks to bring clarity to what can be a complex process. Also, there are annual forums for stakeholder feedback each year and applicants are encouraged to attend these events as well.

The most common mistake we see developers making is not reading the instructions thoroughly. Forms change from year to year, and if developers—or their consultants—don’t actually read the current year’s information, then they could miss important updates. This would put them at great risk of losing valuable points in the review process.